When we think of robots, it conjures up images of lifelike assistants that cook and clean for us or do all the heavy lifting we don't want to do. The technology isn't exactly there yet, but the use of robotics is growing and the devices are continuing to improve in their effectiveness and in the number of applications. With various uses becoming more mainstream, one company, iRobot (IRBT) - Get Report, is reaping the benefits.

When we think of iRobot, we envision the television infomercial showing the little round vacuum cleaners moving across the floor with promises of effortless cleaning. Not exactly the high-tech version of the robot we may be anticipating, but impressive all the same.

Well, this company is coming out with the next generation of consumer products, better working vacuums and the like. It is also on the verge of launching a new product line that promises to be something completely different.

Beside the consumer-based products, the company also produces robots for military use. These robots allow troops to check for roadside bombs and provide systems to look for snipers and potential mortar attacks. The idea of no longer having to send a soldier into a dangerous situation whenever possible is very appealing. No longer does a soldier need to search a building. Instead, the robot can. The uses of these products are growing and the military applications seem to be unlimited.

So, all this has led to improved sales for iRobot's new consumer products, and the new product lines are potential earnings-drivers going forward. We already are seeing improved performance from the technology sector, and we continue to look for opportunities in this space.

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Of course, while we like the story on the stock and see the potential for earnings growth, we are more impressed in what is happening technically. After its initial public offering in early 2006, the stock headed straight down over the next 12 months.

Most of 2007 has been spent building out a basing formation. This is a large positive improvement and has taken the stock off the defensive and back on the offensive. It is not entirely there yet, but there are many signs of improvement.

Volume has been increasing significantly into strength, while pullbacks are occurring on lighter volume. This is an indication of underlying demand for the stock. The long-term moving averages have begun to turn up, indicating the stock's trend is transitioning away from being down. The stock is now forming a bullish consolidation, a typical constructive pattern that occurs prior to the next rally.

We expect the stock to continue to improve and work higher. The upside potential is to the high $20s, but the stock will need to hold the $18 level to maintain the improvements we have identified.

At the time of publication, John Hughes and Scott Maragioglio had no positions in the stocks mentioned. Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.